Is It Time to Buy Union Pacific?

For patient Union Pacific bulls, a low-risk entry opportunity seems to be developing.

Shares of Union Pacific (UNP) may have reached a selling climax last month. The stock's steep bear trend that began in late October is showing early signs of a bottom.

Union Pacific has stabilized nicely following a massive selling wave from Jan. 20 to Jan. 22. For patient bulls, a low-risk entry opportunity is developing. If Union Pacific continues to gain its footing this week, a healthy rebound may soon follow.

During last month's three-day distribution wave, Union Pacific's selloff from the multi-week October high stretched to over 30%. January's earnings-inspired phase extended the damage but only slightly. Despite the heaviest selling pressure in years, Union Pacific held up fairly well. Along with a divergent low in the daily moving average convergence/divergence, the stock's weekly MACD indicator remains deeply oversold. This setup indicates that shares have become exhausted to the downside and a buying opportunity is developing.

In the near term, Union Pacific investors should keep a close eye on the $72-to-$70 area. This nearby support zone includes last week's high as well as this morning's early low. Union Pacific should be considered a low-risk buy in this area.

On the downside, a close back below last week's low of $68.40 would indicate that more basing will be needed before a significant recovery move can begin.